Where assets are used for private and business use
If an asset purchased by a business is used for a mix of business and private purposes, you can only claim a deduction for the portion of the expenses related to your business, see Account for private use of assets correctly.
We continue to improve data matching processes across a range of sources to identify entities that may be using business assets for personal purposes without appropriately accounting for that use.
We also look at the use of assets for private pursuits that are not appropriately accounted for under the law, including deductibility of expenditure, Division 7A or fringe benefits tax. More information can be found on Payments by private companies – use of assets and Depreciation and capital expenses and allowances.
Situations that attract our attention include:
- private aircraft ownership or activities
- art ownership and dealings
- car or motor bike racing activities
- high value and charter boat activities
- enthusiast or high value motor vehicles
- grape growing and other farming pursuits
- horse breeding, racing and training activities
- holiday homes and rental accommodation
- sporting clubs and other activities involving participation of the principals of private groups or their associates.
Income tax
We focus on issues about:
- claiming deductions against other income for the conduct of private pursuits or assets that are private in nature – this is a tax risk if the entity is not carrying on a business relating to those assets or pursuits
- eligibility for an immediate or accelerated deduction in relation to assets
- incorrectly apportioning deductions where the asset either
- has been used for both income producing and private purposes
- is not available for rent or hire
- entities that have disposed of assets but have not reported revenue income or capital gains.
Fringe benefits tax
We are concerned about entities that have purchased assets through their businesses but have used them for the personal enjoyment of an employee or associate.
GST
We are concerned about entities that have claimed input tax credits for expenditure for private pursuits.
Superannuation
We are concerned about self-managed super funds (SMSFs) that have acquired assets and used them for the benefit of the fund's trustees or beneficiaries.
What to do if you use an asset purchased by a business for a mix of business and private purposes.